As per the initial estimates by the Ministry of Finance, the average inflation rate could sharply accelerate to up to 26 per cent due to the disruption in supply chain.
The estimates of 26 per cent as much higher than the IMF and State Bank of Pakistan’s (SBP) pre-flood projections of 18 to 20 per cent.
As per sources, the Ministry has prepared the initial estimates of economical losses due to floods and is expected to present the report in a cabinet meeting with other stakeholders comprising the SBP and Planning Ministry.
“Once the quantum of losses is agreed upon, the government will make a decision to approach the bilateral and multilateral creditors for financial assistance,” said Aisha Pasha, Minister of State for Finance.
“The news out of Pakistan is extremely distressing and my thoughts are with the victims and families affected by the severe floods,” Asia Development Bank President Masatsugu Asakawa said.
According to Pasha, the initial estimates indicate that the losses to economy are up to 2 trillion PKR.
The consideration to reach out to the IMF for emergency flood relief assistance package is already being contemplated during consultations between Finance Minister Miftah Ismail and Prime Minister Shehbaz Sharif.
“Miftah Ismail raised the IMF financing issue during a flood-related meeting, also attended by the Chief of Army Staff General Qamar Javed Bajwa,” said a source in the Finance ministry.
As per Ismail, there were two financing instruments that were being considered at the moment. However, he added that as the discussions and deliberations are in initial stage, no decision has yet been taken to approach the IMF.
The IMF had previously approved $1.4 billion emergency financing for Pakistan under Rapid Financing Instrument (RFI) to help the country deal with the Covid-19 pandemic in April 2020.
Experts say that similar to April 2020 RFI from the IMF, a condition free financial assistance seems to be the only available option for Pakistan as other financing instruments of the IMF require pre-conditional actions or economic fundamentals, which cannot be facilitated at the moment.